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Snap Forecasts Zero Revenue Growth for Q4 2022; Shares Crash Dragging Meta, Alphabet, Twitter

Snap reported its slowest revenue growth for the latest quarter and forecast no revenue growth in the typically busy holiday quarter.

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Shares of Snap sank about 25 percent before the bell on Friday, after the owner of photo messaging app Snapchat forecast zero revenue growth for the current quarter, triggering a slide in other social media stocks dependent on advertising revenue.

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YouTube-parent Alphabet, Facebook-parent Meta Platform, Pinterest and Twitter all slid between 1.7 percent and 9.2 percent in premarket trade.

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"We believe Snap is facing increased competition, primarily from TikTok, both for time spent and increasingly for ad dollars, which is compounding the challenges of a softer macro and Apple's (privacy-related) changes," Atlantic Equities analysts said in a note.

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The brokerage said competition is likely to continue to increase in 2023. Snap, on Thursday, reported its slowest revenue growth as a public company for the latest quarter and forecast no revenue growth in the typically busy holiday quarter, while Wall Street analysts were expecting a 3.3 percent rise, according to Refinitiv data.

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The company had said in August it would lay off 20 percent of its employees and discontinue projects such as gaming and a flying camera drone to cut costs and brace for a deteriorating economy.

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"Given SNAP had been growing headcount over 30 percent y/y for 4 straight quarters, we wonder if the company can execute on its lofty growth objectives with a 20 percent smaller employee base," Jefferies analysts said in a note.